Dish is trying to cash in over $3 billion in discounts meant to help "very small businesses" during wireless spectrum auctions, but FCC commissioner Ajit Pai isn't having it. According to The Wall Street Journal, Pai intends to petition commission chairman Tom Wheeler to investigate Dish's eligibility for these discounts. Pai, who's been protective over the FCC's small business discounts in the past, says that allowing a large company like Dish to receive such a large discount "makes a mockery" of the program.
Dish would pay closer to $10 billion because of the discounts
The FCC began offering discounts to small businesses back in the ’90s, initially aiming to give more opportunities to businesses owned by women and minorities. Rules were put in place to prevent large companies from using smaller companies to, literally, do their bidding, but it's up to the commission to see that they're enforced. In this case, Dish's bidding was done through two "very small" companies — SNR Wireless LicenseCo and Northstar Wireless — both of which the Journal reports Dish as having an 85 percent stake in. Other companies, including AT&T, have reportedly taken advantage of the small business discount in the past, though none are reported to have done so to the extent that Dish has.
Dish spent $13.3 billion during the AWS-3 spectrum auction, the results of which were announced last week. Unless the commission steps in, as Pai wants it to, Dish will walk away paying closer to $10 billion thanks to the discounts. The Journal reports that it may be difficult for the commission to take the discounts away from Dish — and that's if it decides to open up an investigation.
In a statement, Dish says that it "respectfully disagree[s]" with Pai's criticism and that it is confident that it "fully complied" with rules governing this discount. "Our approach — publicly disclosed ahead of the auction — was based on [Designated Entity] investment structures that have been approved by the FCC in past wireless spectrum auctions, including structures used by AT&T and Verizon," Dish says.
The FCC has actually been planning to overhaul the eligibility requirements for this discount, but its plans would actually make it easier for big businesses to benefit from it. The commission plans to remove a rule that prevents small businesses using the discount from licensing more than a quarter of their spectrum away to a larger company. This limit was initially put in place because the FCC wanted to see regional networks pop up, but now that the wireless landscape is dominated by a few large players, the commission posits that it may as well cut the limitation and let small businesses benefit from that added revenue stream.
Those rules aren't in place yet, but Pai has been a big opponent of the proposal ever since it was introduced. His criticism of Dish is very much an extension of that, showing concern that big businesses are getting too large of an advantage over small ones. Even if the commission can't get these discounts away from Dish, Pai still has time to press for change on how the FCC's small business discounts work in the future. Dish's actions here may give Pai the best example yet for why the discount needs protections.
Update February 2nd, 2:04PM ET: this story has been updated with comment from Dish.